Auto insurance premiums vary widely because they depend in part upon the characteristics of the person insured, shown by statistical analysis and experience to be reliable predictors of future accidents. In New York, risks are grouped for rating purposes by classifications to assure that risks with similar characteristics such as age, sex, marital status, territories, annual mileage, vehicle use – pleasure/work (also see Chapter IX) and driving experience receive comparable pricing treatment. In this way, the risk of incurring losses is spread among many policyholders who have similar characteristics. There would be widespread unfair discrimination, which New York prohibits, in the absence of such a sound classification system.

        You should notify your insurer of any changes while the policy is in force, such as a change of your address or the addition or deletion of a vehicle or driver. An insurer, by law, must revise your premium if it discovers certain information (e.g., that your vehicle is used for purposes other than those listed on your application, other persons operating your vehicle, or surchargeable accidents or convictions), that change the rating exposures.

1. Age

        The most relevant classification in auto insurance ratemaking is age because of its obvious relation to losses. Consistently, young drivers are disproportionately represented in auto accidents in relation to their percentage of the total driver population. If licensed less than three years at the start of the policy period, the principal operator of a vehicle regardless of age will receive an inexperienced operator surcharge pursuant to the Insurance Law.

        Drivers who are 25 years of age and over can generally obtain insurance at a considerably lower cost than younger drivers. Please be aware that many insurers will consider any member of your household with a learner’s permit to be an insured operator of the vehicle for purposes of rating your policy, as this represents an increased exposure.

        There are several different age classifications, within which premiums generally tend to decrease as a person matures. However, some insurers’ statistics indicate that, beyond a certain age, driving skills deteriorate. This causes the claims experience of senior citizens as a group to worsen, thereby causing some insurers to also charge higher premiums for those higher-age categories. On the other hand, many senior citizens may benefit from those insurers that vary their prices by the number of miles a car is driven each year, since they may drive less than the average insured.

2. Driving Record

        Your driving record is crucial in determining your premium and your insurability. If they are willing to insure them, most companies charge substantially more to insure drivers with a history of traffic violation convictions or chargeable accidents than those who have relatively clean records.

        Many insurers will not insure a driver whose recent driving record is poor, even if that driver’s record was clean in the past. The reasons for an insurer’s refusal to accept a risk varies with each company, and a risk declined by one insurance company may be found acceptable by another.

Basic premiums are calculated according to the classification and loss experience of the group to which you belong. A driver’s record of accidents or traffic convictions is also considered in determining the final premium. To further classify policyholders, auto insurance companies apply merit rating plans, which modify the premiums being charged according to an individual’s driving record. The resulting merit rating surcharge is used to properly price the exposure the insurer is writing, and not as a means to recoup payments previously made under a claim.

        Under many insurers’ rating plans, your first at-fault accident could result in a surcharge of up to 40% of your premium, and you could also lose a safe driver discount had you previously qualified for it. Most insurers use a "point" system to assign surcharges for chargeable accidents and traffic violation convictions to your policy. Although both are based on your driving record, this insurance point system is separate and distinct from points against your driving license maintained by the New York State Department of Motor Vehicles (DMV).

        Premium surcharges due to accidents or convictions are governed by the Insurance Law and regulations, which allow surcharges to be applied during the experience period (typically three years) for specified incidents, some of which are:

·         accidents involving bodily injury or death, or losses to property in excess of $1,000, where the insured driver is at fault; or

·         convictions for certain violations, including the following illustrations:

·         speeding more than 15 MPH over the legal limit;

·         driving while intoxicated or impaired by alcohol or drugs;

·         operating a vehicle while attempting to avoid apprehension by a law enforcement officer;

·         leaving the scene of an accident without reporting it;

·         operating a vehicle in a race or speed test;

·         driving without a license or knowingly permitting an unlicensed person to drive your vehicle; or

·         filing a false insurance claim.

However, surcharges are specifically not permitted if, for example:

·         your vehicle was struck in the rear, without a moving violation conviction against you;

·         your vehicle was struck while it was legally parked;

·         you as the insured or your insurer is reimbursed or obtains a judgment of 1/3 or more (on a property damage or physical damage claim);

·         the driver of your car was not at fault (on a bodily injury claim or No-Fault claim) or was struck by a hit-and-run vehicle;

·         the total damage caused by the accident is less than $1,000 and there were no injuries (however, having 2 or more accidents under $1,000 is usually subject to a surcharge);

·         a single minor moving violation of the Vehicle & Traffic Law, other than those excepted by the Insurance Law (some of which are listed above);

·         the accident occurred while the insured was driving an employer’s vehicle in the course of business (this also includes police officers, firefighters and peace officers while on duty in their official vehicles, or while driving any vehicle in an emergency situation); or

·         claims made under comprehensive or towing coverages.

        In general, no policy can be surcharged to a level where the premium exceeds more than three times the base premium for the highest rated vehicle covered by that policy (without the surcharge). Please note that surcharges only apply to the premiums for liability, No-Fault, and collision coverages.

        Your insurer must notify you of the exact dollar amount of any surcharges (and discounts) being applied to your policy as well as the dates of any accidents or convictions on which those surcharges are based. This information must be on, or attached to, your policy declarations page, which contains key identifying information about you and your policy. The insurer must also include information with your policy regarding circumstances under which surcharges must be refunded. Among these are:

·         when it is subsequently established that the accident for which a surcharge was applied falls under one of the exceptions enumerated in the insurer’s merit plan;

·         if the conviction for a chargeable violation or traffic infraction is ultimately reversed;

·         if a surcharge was levied through mistake, misinformation or other error; or

·         the insurer has established a claim file, but no claim was submitted for a period of three years after the date of the incident or the statute of limitations has run and no suit has been filed.